Acquisition of Mining Company

Mining Industry in Indonesia is increasingly growing. It is characterized by the increasing number of investors who invest in the mining industry. The tender requirement implemented by the Government in order to obtain the new mining business license (IUP), however, makes an acquisition of an existing mining company as a preferable method to invest in mining business in Indonesia.

The acquisition of mining company has been regulated in Minister of Energy and Mineral Resources Regulation Number 27 of 2013 on Procedures and Determination of Share Divestment Prices and Changes of Investment Particulars in the Mineral and Coal Mining Business (“Regulation 27/2013”). Pursuant to this regulation, any change in investment including shares acquisition, may be conducted by the business entity engaged in mining business after obtaining the approval of the minister, governor, or regent/mayor in accordance with their authority.

The change of shares ownership shall be made with reference to the provisions of the share ownership restriction as stipulated in Article 27 paragraph (1) and (2) of Regulation 27/2013. Under these provisions, a change of foreign ownership to the company in the stage of exploration may only be conducted when the foreign shares ownership is limited to 75%. Meanwhile, for the company that has been in stage of production may be conducted when the foreign ownership is limited to 49%. With those requirements, a foreign investor wishing to acquire shares of a mining company is prohibited to own share in excess of the above percentage. For an example, if a foreign investor owning 90% shares in a mining company in the stage of exploration wishes to sell all of its shares to another foreign owner, then the maximum foreign ownership in the company will be permitted only up to 75%, and the extra 15% would need to be sold to Indonesians (domestic investors). Similarly, if the company is in the stage of production, then the foreign ownership is limited to 49% of total shares.

The application for the change of shares ownership must be submitted to the minister, governor, or regent/mayor in accordance with their authority, by enclosing a number of documents as required in Article 27 paragraph (5) of Regulation 27/2013. Furthermore, the granting or rejection of the application will be determined within a period of 14 working days as of the date when the application is received completely and correctly. If the application for the change of ownership is rejected, the rejection must be submitted in writing to the applicant along with the reason thereof.